Are New Music Streaming Services a Threat to the iTunes Empire?

Once upon a time, physical media sales ruled the music landscape. Wal-Mart thoroughly enjoyed its reign as the largest seller of CDs on the planet. Then iTunes came along and took online music distribution from a niche to the most popular way for people to buy music.

Now a new breed of businesses are beginning to fill the landscape. Instead of offering single songs or albums, they give customers the freedom to listen to any combination of songs or albums they want, either completely free or with a low monthly fee. Are these services merely enjoying rapid but short-lived growth or do they represent the future of how we consume music?

Streaming Is Here to Stay

With the release of iCloud, you probably thought the rumors surrounding Apple launching a streaming service were finally over, you were wrong. The problem of course was, it didn’t seem that Apple was really launch a streaming service at all but was instead providing us with a much appreciated way to keep our music, apps and files synced across various devices.

My initial reaction was that this was Apple’s way of boldly staying out of the streaming game. Let Amazon and Google figure out their streaming services while Apple takes its own route and to help you listen to your music with your actual files, no streaming necessary.

However, now that we’re seeing the sneak peeks of iTunes Match, it becomes clear that there is indeed a streaming component. Not only can you download and sync files across devices, you can instantly stream all of the music that you own to your Mac or iOs device without downloading.

Even this though may not really mark the end of the Apple streaming discussion. What about music that you don’t own? A different model for music streaming is starting to make leaps and bounds in popularity and even more than Amazon’s cloud service and Google’s Music Beta, this one could represent a serious threat to iTunes’ music sales and even its core business model.

The New Kids on The Block

Rdio and Spotify represent a different way to get your music

This new threat doesn’t seek to sell individual songs or even albums, instead they’re selling freeform access to a database containing almost every song ever recorded. For a small monthly fee you can listen to whatever you want, whenever you want (as opposed to a Pandora-like station where your influence is limited). Create a playlist with a few hundred songs, listen to them all for a while and then ditch it for a new list of completely different content. If you listen to a new album and hate it, switch to something else instantly without wasting a dime.

These apps look and feel like your personal iTunes library, the main difference being your personal library is nowhere near this expansive. With millions of choices all available instantly, there’s very little to not love about this new system.

Previously, Rdio largely owned this strategy in the U.S. but Spotify has finally hit our shores and is gaining ground fast with a free, ad-powered plan that is quite enticing to users who don’t want to dish out $5 a month to Rdio.

Both Spotify and Rdio are awesome services earning high marks from their customers. Both represent a fundamental shift from the old way of buying only the music want towards the new way, which instead lets you subscribe to all the music you could possibly listen to and more.

Will Apple Respond?

The biggest question I have about these new services is whether or not Apple will perceive them as a threat. The most dangerous part about being the leader in any tech sector is that you can easily get comfortable and wake up to find that the industry has innovated past you. After all, this is precisely what Apple did to the physical CD sales of retail giants like Wal-Mart.

The music industry seems to be willingly signing up for this new form of music access which could possible hold more potential for continual profits than mp3 sales or radio. As a happy customer listening to Spotify as I write this article, I can honestly say that I don’t feel a pressing need to actually purchase an album from iTunes any time in the near future.

As cool as iCloud is, in its current state it’s a response to a completely different question than the one we’re posing. However, I would wager that the folks at Apple aren’t so easily outmaneuvered. You can bet that they’re at least looking into the pros and cons of a streaming subscription plan. It’s entirely possible that iTunes could actually improve its monthly income with the addition of a Spotify-like streaming plan.

Testing the Streaming Waters

Apple gave users a free stream of the new Chili Peppers album

Apple recently made a tiny move in this arena and it perked up the ears of every tech blog on the web. The Red Hot Chili Peppers just came out with a new album and before it was officially released, iTunes offered customers an exclusive opportunity to stream the entire album once to check it out.

This is definitely a new trick for Apple to pull out of its proverbial hat and it has us all wondering what else they’re cooking up. The move is a full-on admission that the possibilities for streaming and iTunes together haven’t been explored anywhere near their potential.

What Do You Think?

Personally, I hope that Apple is indeed exploring options for streaming. As I’ve mentioned before in previous articles, I have little need for services like Google Music Beta, which seem geared towards letting me hear the music that I own when I’m not at my own computer or in possession of my iPhone or iPad, which is pretty much never.

However, I find the freedom of services like Rdio and Spotify extremely liberating. If my friend tells me about an artist that I might like , I can instantly pull up every album they’ve ever recorded and listen to them from start to finish at no additional cost than what I’ve already budgeted for the month. It’s as if this was how music was always meant to be.

I think if Apple is going to continue to rule music sales, they need to keep a close eye on innovations like these services and make sure that they don’t represent a significant threat to mp3 downloads. If they do, it’s time to plan the next major evolution of the iTunes store. If the Spotify business model works, it could be applied to music, movies, books and more in iTunes. An enticing thought to say the least.

Ultimately, all of this is pure conjecture at this point. Your guess is as good as mine as far as if these services are remotely a threat to iTunes and how/if Apple will respond as a result. Leave a comment below and share your thoughts on the future of music enjoyment. Will individual song and album purchases reign for years to come or will streaming subscriptions begin to replace an old and tired music consumption model?

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Responses

Pre-spotify i didnt pay for my music needs. Since spotify offers a simpler way to get all the music i need i dont download music from piratebay anymore. Now, if the market realize that its not the greed thats behind most piracy they might realize that if they offer a spotify with tv-shows and movies people will be paying for it. Until then i will download tv-shows and movies for free since its the easiest way right now..

biggtunes

September 2nd

the 120 dollars i’m gonna spend a year is what i spend on itunes in a day every other week or so sometimes more

I’m a Musician A&R Mixer Producer Engineer Educator in Music technology,this is the greatest tool ever

Just ask Yourself what You spend on Itunes for dodo, read on and You will get My dodo reference !!!!

I hate buying MP3’s because they’ll be obsolete in few years and I love Music I have walls of records that i want at My finger tips replace a lot with CD’s in the past and the CD’s sound good

When We make Albums the quality is much better than a CD or a record an mp3 was never meant for music,

It was made for an easy way to store and edit large video files that would talk to the big editing machines to edit films as well as other purposes so the quality isn’t great because it was never meant for listening just data compression

buying mp3″s will be like having a bunch of cassette tapes or records 10 to 15 years from now as technology is let down from the military and other corps that have it now

Yes You make a great point and I understand the house concept and ownership but whats the use of owning a house that wont be worth anything 2 decades from now like 8 tracks

sorry if I sound like I own shares but having everything at My finger tips for the first time is great not just the music I like but everything else to explore and experience is the real plus without down loading or stealing< I cant imagine the musical vocabulary and wide range of Music the next generation will inherit from services like this… OK i'm starting to feel like I drank the koolaid at some cult gathering

I’m a huge fan of Spotify. The price is right and the service itself is just fantastic. But there’s still one major flaw for me.

Music ownership.

I would compare Spotify and iTunes to renting or purchasing a house. Renting is great, you get a really nice place for the same monthly fee you’d be paying for a much smaller house. However, you don’t own it. Once you leave that apartment, you have nothing to show for it.

If/when you ever leave Spotify or any of these other streaming services, you lose all of your music. All of it.

This is why iTunes Match, in my opinion, is the end-all solution. It might cost more upfront to get the music you want, but it’s yours to keep. And now with iTunes Match, I have the same awesome streaming capabilities that gave me the reason to pay for Spotify in the first place, at $9.99 a month.

Oh, and iTunes Match is only $24.99 a year.

Alexei

August 31st

I have +5k songs in my computer. Comparing to everyone I know, I organize the id tag including starts (rating) and cover image in iTunes. When I browse my albums, I already know which songs are my favorites (5 star), great (4 stars), good (3 stars), etc.

What about Spotify? How do you keep a history of your favorites? Does Spotify keeps a user id containing all your preferences?

I have not seen any streaming service or any of these spottily, pandora, hulu come to my home country “Canada”. So, I am sticking with iTunes.

biggtunes

September 1st

just use a Us credit Card or paypal a us zip code

open an account and if your in canada use hotspot shield to give you a US IP address, register and once your registered you can log on from any country’s ip in canada roger and or bell

I went on spotify last week and i’ll never use itunes again period i’ve playlisted hundreds of albums i didnt sleep the first 3 days there was stuff I couldnt even find on itunes they had everything accept the beatles but they’ll have that soon

heres another plus, what it doesnt mention in this artical is if you press “””””offline”””” in spotify while a playlist is highlighted it downloads everything in that list to your hard drive so you dont have to be online to listen or keep paying your internet service provider (steaming fee’s thats the hidden cost thats not mentioned with any steaming service) is the fee’s to your internet provider

Joel

September 1st

I wish I could use any service in Australia. Nothing works, not even iTunes Match

The ability to put any song I can remember from the past (for the most part) on my iPod and not have to have a network connection to listen to it for $10 a month has been enough to make me a sell out. I can’t get enough of it.

Anytime anyone says “hey, have you heard *that* song” my immediate response is to run over to my mac and search it up. 9 out of 10 times it’s there and way more.
I even have my own album on there already.

My 2 cents about the future:

If Spotify adds the ability to view Podcasts, iTunes will only ever be opened for a device update for me.
Apple needs to make iTunes faster as far as it’s response time. It’s probably the premiere app in OS X and it’s the slowest.
It’s not the “streaming” part of Spotify that hooked me, it was the offline feature that did it. This is because in a lot of situations (especially workplace scenarios) you cannot be streaming media on a regular basis, so if iTunes is going to get in the game it needs to have a similar feature.
Crazy as it sounds, I believe people are becoming less concerned about owning stuff and more concerned with always “having access” to stuff. For example… Google, Netflix, Wikipedia and (for the future… Spotify or some other service).
This not having to permanently “own” stuff and have to find a place for it also works into the Macbook Air and iPad era with the default smaller drive space. Being able to make an album “offline” until you’re sick of it, replacing it with what kind of music you’re “feeling” now and then being able to go back to the previous album later is VERY appealing.

PS – if someone from Spotify is listening… being able to rate an item with more than 1 star would be sweet and also a visualizer would kick butt. ;)

The ability to put any song I can remember from the past (for the most part) on my iPod and not have to have a network connection to listen to it for $10 a month has been enough to make me a sell out. I can’t get enough of it.

Anytime anyone says “hey, have you heard *that* song” my immediate response is to run over to my mac and search it up. 9 out of 10 times it’s there and way more.
I even have my own album on there already.

My 2 cents about the future:
1. If Spotify adds the ability to view Podcasts, iTunes will only ever be opened for a device update for me.
2. Apple needs to make iTunes faster as far as it’s response time. It’s probably the premiere app in OS X and it’s the slowest.
3. It’s not the “streaming” part of Spotify that hooked me, it was the offline feature that did it. This is because in a lot of situations (especially workplace scenarios) you cannot be streaming media on a regular basis, so if iTunes is going to get in the game it needs to have a similar feature.
4. Crazy as it sounds, I believe people are becoming less concerned about owning stuff and more concerned with always “having access” to stuff. For example… Google, Netflix, Wikipedia and (for the future… Spotify or some other service).
5. This not having to permanently “own” stuff and have to find a place for it also works into the Macbook Air and iPad era with the default smaller drive space. Being able to make an album “offline” until you’re sick of it, replacing it with what kind of music you’re “feeling” now and then being able to go back to the previous album later is VERY appealing.

PS – if someone from Spotify is listening… being able to rate an item with more than 1 star would be sweet and also a visualizer would kick butt. ;)

John

rob

September 24th

before i paid for download hosts (like rapidshare, hotfile, etc) for downloading music (YES PIRATED MUSIC) i never bought an itunes song, now since grooveshark i stream everything, i have a premium account in GS (couple of years before spotify) so for me i rather pay $10 bucks a month for unlimited music rather than 1 album.

And for the rent and own house like someone said before, if i really like some album i would rather buy it physically, i will have it forever (i can also rip it to mp3) i would have the cover and something that i can touch.

Mark

November 3rd

I have used Spotify in the past, but after i while i noticed that i am only listening to the same 5 albums everytime i launch spotify, i had it for like 4/5 months.. (yea we actually had it before the US in the Netherlands ^^).

Then i read an article from an artist from the Netherlands, called Ilse de Lange, great dutch singer (sing in english).
She said that she had to be on Spotify, to go with the time, and market, but rather not do it, because there is almost no profit in it, they get so few money from listening, that its almost not worth it, but she needs to be seen.

Now that triggered something with me, and im an apple fan, and Spotify is a bad thing for apple, so i went back to itunes, bought the same 5 albums that i listened over and over again, and it costs me 50 euro once, and can do with it half a year.

If i buy one CD every month, its a lot, so i just stick with itunes, because the artists get way more profit out of it, and so it feels better for me to actually buy it.

greetings,

Who Me

November 3rd

While streaming services are/will make it so Apple has to take notice so as not to lose to much market share. I don’t believe it’s a threat to such a degree they risk being shuffled aside, not unless Apple really ignores the trends and goes full steam ahead with the current model. For myself, streaming services are OK however I don’t like needing to rely on a connection to listen to my music. On the contrary it’s often when I am not connected that I most want my music handy. I’m also of the mind set that I’d rather pay for music that I want long term rather than pay per month for ten hours of good music among a hundred hours of dross, it just doesn’t make sense to me to pay for that. That being said I will happily listen for free to DI and when I hear a track I want long term go to iTunes and buy it. The rest might be good, but not good enough that I’d shell out money to listen to it. It’s why I like the a’la cart nature of iTunes, I can take what I like and leave the rest.